Responding to the Wii

IntroductionKazuo Hirai, the chief executive of Sony Computer Entertainment Inc. (SCEI) has encountered two large rivals in the video game industry this year. Nintendo and Microsoft have released advanced video game consoles that have left Sony sales behind. Nintendo especially, has broken the status quo for marketing in the video game industry by dramatically expanding its target market from 18-34 year-olds to 9-65 year-olds both male and female with its new video game console, the Wii. For years, Sony had gone head to head with Microsoft competing for the same market with their PSPs and X-Boxes consoles. Both Sony and Microsoft focused on using advanced technology to create cutting edge video game consoles whose purpose was more than just video games. Their target market was 18-19 year old males. On the other hand, the Wii is not as advanced as the PSP or X-Box. Its main attraction are its wireless, motion-sensing controllers that allow gamers to use their limbs (punching, swinging, batting) to control the actions of on-screen characters. Also, the Wii was designed with user- friendly capabilities that appeal to all audiences. Nintendo is threatening competition for Sony. There are five main forces that drive Video Game Industry competition: * Intensity of rivalry among Competitors

* Threat of New Entrants
* Threat of Substitutes
* Bargaining Power of Suppliers
* Bargaining Power of Buyers

Strategic Issues

Intensity of Rivalry among CompetitorsOne of Sony’s largest threat and competitor is Nintendo. Nintendo sold 32.4 million units for the Wii, while Sony sold 15.5 million units. While Sony was occupied retaliating to Microsoft’s X-box video game console, Nintendo rose to take number one position in the video game industry. In 2007, Sony lost 9.7% of its Operating Margin, while Nintendo was up to 58.8% in millions of dollars. This is an important issue because Sony has been at the top of the...